NEW DELHI Finance Minister Nirmala Sitharaman Friday outlined a host of measures to boost infrastructure, digital economy and jobs creation to achieve USD 5 trillion economy target and said a massive push to all forms of physical connectivity is helping bridge the rural-urban divide.
Tabling the Modi 2.0 government’s maiden budget in Parliament, Sitharaman said infrastructure financing needs have been estimated at around Rs 20 lakh crore (USD 300 billion) a year and proposed to enhance the sources of capital for infrastructure financing including setting up a Credit Guarantee Enhancement Corporation for which regulations have been notified by the Reserve Bank of India.
Terming the connectivity as the lifeblood of the economy, the minister announced a slew of steps to scale up India’s infrastructure programmes including augmenting 1,25,000 km of rural roads under the Pradhan Mantri Gram Sadak Yojana at a cost of Rs 80,250 crore and creating a national highways grid.
Stressing the need for an estimated investment of Rs 50 lakh crore for augmenting railways infrastructure, she said that steps were taken to boost infrastructure in sectors like roads, waterways, metro and rail besides emphasising on the measures for a self-reliant aviation industry.
Asserting that physical and social infrastructure has to be built, Sitharaman said: “The common man was served even as major transformational reforms were being rolled out. And for this to continue we need to invest heavily in infrastructure, in digital economy and on job creation in small and medium firms.”
The finance minister said the government has given a massive push to all forms of physical connectivity through Pradhan Mantri Gram Sadak Yojana, industrial corridors, dedicated freight corridors, Bhartamala and Sagarmala projects, Jal Marg Vikas and UDAN Schemes.
While the industrial corridors would improve infrastructure availability for greater industrial investment in the catchment regions, the dedicated freight corridors would mitigate the congestion of railway network benefitting the common man, she said.
“The ambitious programme of Bharatmala would help develop national road corridors and highways, while Sagarmala would enhance port connectivity, modernisation and port-linked industrialisation. If Sagarmala is aimed at improving the infrastructure for external trade, equally it is the poor man’s transport too. Waterways are proven as a cheap mode of transport,” she said.
The Jal Marg Vikas project for capacity augmentation of navigation on national waterways is aimed at smoothening internal trade carried through inland water transport. These initiatives will improve logistics tremendously, reducing the cost of transportation and increasing the competitiveness of domestically produced goods, she added.
Sitharaman said with the changing economic scenario, it is important to upgrade roads connecting villages to rural markets and for this PMGSY-III is envisaged to upgrade 1,25,000 km of road length over the next five years, with an estimated cost of Rs 80,250 crore.
Saying that the schemes like UDAN were bridging rural-urban divide, She said as the world’s third largest domestic aviation market, the time was ripe for India to enter into aircraft financing and leasing activities from Indian shores.
About metro rail projects, she said a total route length of 300 kilometres have been approved during 2018-19 and 657 km of metro rail network has become operational in the country.
The finance minister said India’s first indigenously developed payment ecosystem for transport, based on National Common Mobility Card (NCMC) standards, launched by the Prime Minister in March, 2019 will enable people to pay multiple kinds of transport charges, including metro services and toll tax, across the country.
About highways, she said the government will carry out a comprehensive restructuring of National Highway Programme to ensure that the National Highway Grid of desirable length and capacity is created.
On waterways, she said the country needs to develop it to shift a significant portion of inland cargo movement from road and rail.
This government envisions using the rivers for cargo transportation, which will also help to decongest roads and railways, she added.
As part of the Jal Marg Vikas Project for enhancing the navigational capacity of Ganga, a multi-modal terminal at Varanasi has become functional in November 2018 and two more terminals at Sahibganj and Haldia would be completed in 2019-20, Sitharaman said.
“The movement of cargo volume on Ganga is estimated to increase by nearly four times in the next four years. This will make movement of freight, passenger cheaper and reduce our import bill,” Sitharaman said.
The budget estimated railway infrastructure would need an investment of Rs 50 lakh crore between 2018-2030.
The minister also said that large public infrastructure can be built on land parcels held by central ministries and Central Public Sector Enterprises across the country.
Stressing the need for innovative financing for infrastructure, she said India has had a reasonable success in brownfield asset monetisation and aditionally, NHAI carried out one ToT (toll operate transfer) transaction garnering Rs 24,000 crore.
Highlighting PMGSY, Sitharaman said it has brought many socio-economic gains in the rural areas and all weather connectivity has now been provided to over 97 per cent of such habitations.
Budget a pack of competing goals amidst slower growth: Moody’s
Global ratings agency Moody’s Investors Service has opined that achieving the “competing budgetary goals” of lower fiscal deficit, higher growth and larger income support to farmers and the other needy sections of the society will be challenging.
Despite the income support measures announced in the Budget Friday, the economy is likely to grow more slowly and there is an additional risk of the fiscal deficit target of 3.3 percent being missed if tax collection underperform, the agency warned.
The government will have to rely on one-off revenue such as disinvestments and transfers from the central bank, and off-budget spending to achieve the headline fiscal deficit targets, it said.
Fiscal deficit is one of the key metrics tracked by global rating agencies for assessing the sovereigns for its impact on inflation and importance from a general macroeconomic stability perspective. In the past, agencies have warned of downgrading the country’s ratings because of fiscal profligacy.
Moody’s said the budget eyes lower fiscal deficit target while maintaining its support for growth and income.
“Achieving these competing goals will be very challenging. We expect the economy to grow relatively slowly, despite the government’s income support measures,” it said in a statement.
From an expenditure perspective, the maiden Budget presented by Nirmala Sitharaman, the first woman finance minister, has a Rs 70,000 crore bank recapitalisation proposal, in addition to funding an expansion of support for farmers, a new pension scheme and relief for small taxpayers.
The agency concedes that this will support growth by encouraging the flow of credit to the economy, but warned that such a move will add to government debt.
The government is aiming to lower deficit to 3.3 percent in FY20 from 3.4 percent target set earlier.
The agency said to achieve this, the government will have to rely on one-off disinvestment income, higher taxes on the rich, and increased excise duties on petrol, diesel, precious metals and tobacco products.
“There’s a risk of missing the fiscal deficit target if income from tax revenue underperforms projections, as it did last year,” the agency warned.
Govt to infuse Rs 70,000 cr into state-owned banks
Finance Minister Nirmala Sitharaman Friday announced that the government will pump in 70,000 crore into public sector banks (PSBs) to strengthen them and enhance their lending capacity.
Unveiling Budget 2019-20, she said non-performing assets of PSBs have come down by Rs 1 lakh crore.
Banks have recovered Rs 4 lakh crore due to the Insolvency and Bankruptcy Code and other means effected in the past four years, she said.
The government has decided to infuse Rs 70,000 crore in the state-owned banks, so that credit growth can be improved, she said.
Domestic credit has increased to 13 per cent.
She further said the government has carried out consolidation in the PSBs, smoothly reducing their number by 8.
For every rupee in govt kitty, 68 paise come from taxes
For every rupee in the government coffer, 68 paise will come from direct and indirect taxes while states’ share of taxes and duties is the single-largest expense head accounting for 23 per cent of total total spending, Budget documents showed.
According to the Budget 2019-20 presented in Parliament by Finance Minister Nirmala Sitharaman, goods and services tax collections will contribute 19 paise in every rupee revenue.
Corporation tax is the single-largest source of income, contributing 21 paise to each rupee earned.
The collection from borrowings and other liabilities will be 20 paise while income tax will yield 16 paise to every rupee collection.
The government intends to earn 9 paise from non-tax revenue like disinvestment, 8 paise from Union excise duty, 4 paise from customs and 3 paise from non-debt capital receipts in the every rupee collection.
On the expenditure side, the biggest outlay component is the states’ share of taxes and duties at 23 paise, followed by interest payment at 18 paise.
Allocation for the defence has been kept unchanged at 9 paise.
Expenditure on central sector schemes will be 13 paise, while the allocation for centrally-sponsored schemes will be 9 paise.
The expenditure on the Finance Commission and other transfers is pegged at 7 paise. Subsidies and pension would account for 8 paise and 5 paise, respectively, in each rupee spending.
The government will spend 8 paise on other expenditure.
Total Budget size increased to Rs 27,86,000 crore for 2019-20 from Rs 24,57,235 crore for 2018-19 (revised estimates).
Govt proposes to raise income tax exemption for NPS subscribers
Finance Minister Nirmala Sitharaman Friday proposed to exempt from income tax 60 per cent of the amount received by subscribers of National Pension System on closure of account or opting out of the scheme.
Under the existing provisions of the Income Tax Act, any payment from the NPS Trust to an assessee on closure of account or opting out of the pension scheme, up to 40 per cent of the total amount payable, is exempt from the tax.
“With a view to enable the pensioner to have more disposable funds, it is proposed to amend the said section (10 of the Act) so as to increase the said exemption from forty per cent to sixty per cent of the total amount payable to the person at the time of closure or his opting out of the scheme,” said a Budget document tabled in Parliament by the minister.
The proposed higher exemption limit will be applicable from April next year.
The minister also proposed to separate the NPS Trust from regulator Pension Fund Regulatory and Development Authority (PFRDA) in order to address issues over conflict of interest.
The PFRDA implements and regulates the National Pension System (NPS) and Atal Pension Yojana through various intermediaries, including the NPS Trust.
The matter of conflict of interest arises as PFRDA is the regulator of the pension sector in India, at the same time it runs pension schemes such as NPS and APY.
“Keeping in view the wider interest of the subscribers and to maintain arm’s length relationship of the NPS Trust with PFRDA, steps will be taken to separate the NPS Trust from PFRDA with appropriate organisational structure,” the minister said in her Budget speech.
The trust was established by the PFRDA for taking care of the assets and funds under the NPS.
The proposal to separate the two job roles was under consideration for last few years.
APY, mainly targeting the unorganised sector employees, offers five slabs of pension from Rs 1,000-5,000 per month upon retirement.
Employees in the age bracket of 18-40 years can sign up for an APY account.
The NPS is a voluntary, defined contribution retirement savings scheme for government employees as well as for those working in the private sector.
The Budget document further said that in order to ensure that the Central government employees get full deduction of the enhanced contribution, it is proposed to increase the limit from 10 to 14 per cent of contribution made by the government to the account of its employee.